10 Benefits of Market Segmentation
For some years now, experts and executives in the business world have been discussing whether market segmentation has already arrived at its dead end or still remains relevant. Some business executives, as big as former IBM CEO Ginni Rometty, argue that segmentation, as a marketing strategy, has become an obsolete idea, even though there are many benefits of segmentation.
So, what has prompted the theory of the demise of the market, customer, or consumer segmentation? According to them, it is the arrival of Big Data and data-driven personalized customer services.
Has Big Data really made market segmentation redundant? The simple answer is “Not just yet”. As long as you will be conducting market research and as long as you will need to know the common attributes of your diverse customers for targeted marketing, you will be applying market segmentation techniques in your marketing strategies.
What Is Market Segmentation?
When trying to reach customers with a marketing message or ad campaign, targeting the right market with the right message is essential — If you aim too broadly, your message might reach a few people who end up becoming customers, but you’ll also reach a lot of people who aren’t interested in your products or services. When your messaging isn’t optimized for your audience, you’ll end up with a lot of wasted advertising dollars.
Market segmentation can help you to target just the people most likely to become satisfied customers of your company or enthusiastic consumers of your content. To segment a market, you split it up into groups that have similar characteristics. You can base a segment on one or more qualities. Splitting up an audience in this way allows for more precisely targeted marketing and personalized content.
Digital Data & Revitalization of Market Segmentation
Running a business is all about making informed strategies and taking calculated steps to have more and more people buy your products and stay loyal to your brands. For doing this, you need to be consistently informed about the changing facts and figures of the market and feel the pulse of your customers.
Market or customer segmentation is the best practice available for effectively managing marketing and reaching out to customers. However, without reliable data, you won’t be able to accomplish any of these goals.
Because customers have varying needs, desires, preferences, and priorities and because getting track of every individual customer to address their expectations is not always possible, businesses need to utilize their data for developing marketing insights and for offering services, products, or solutions to the consumers on the basis of their common attributes. Hence there are many benefits of segmentation.
10 Benefits of Market Segmentation
In a recent survey of marketing professionals in North America, 62 percent of respondents said improving audience segmentation to enable more precisely targeted messaging was a top priority. There’s a reason improving segmentation was the most frequently reported priority in the survey. Market segmentation offers many benefits to marketers, publishers, and others, including the following advantages.
1. Improves Campaign Performance
Market segmentation can help you to improve the performance of your marketing campaigns by helping you to target the right people with the right messaging at the right time. Segmentation enables you to learn more about your audience so you can better tailor your messaging to their preferences and needs.
Targeting a specific segment that is likely to be interested in your content or product is much more effective than targeting an overly broad audience. If you advertise to an entire market, you will end up spending a massive amount of money on ads, but a relatively small percentage will convert. If you instead direct your marketing to a segment with the right characteristics, you can increase the conversion rate of your campaign considerably.
2. Increases Clarity
The first and foremost use of market segmentation is to develop clarity. After mining and cleansing your data, all you have is the most accurate and relevant information about the customers. Once you have the data ready, you can use this information to put the customers, who share particular business-relevant attributes, together in a group.
The primary objective of segmentation is to remove the unimportant clutter of information and keep what is useful and actionable on your desk.
3. Improves brand loyalty and customer engagement
Customer engagement is one of the most important advantages of market segmentation because it is critical to influencing the needs and interests of customers.
You can collect customers’ behavioral data from social platforms, mass media, or any other source and can use that to develop customer and market psychographic segmentation to address their needs more effectively.
Market segmentation has improved the way to engage customers with motivational efforts and communication. Ultimately, this has impacted brand loyalty as well in a positive way.
4. Develops Consumer Insights
If “Know thy customers” has always been an oft-quoted mantra in marketing, it has become even more loaded with meanings in the digital era. Today, your customers are just a click away, expecting you to frequently pat them on their backs.
With clearly defined customer segmentation and contact profiling, you can know who your customers are, where they are, and what they need better.
5. Reveals Areas to Expand
Market segmentation can also help businesses to identify audience segments that they are not currently reaching with their marketing efforts and then expand into new markets.
When you look at your audience data, you might discover interests that you didn’t realize your customers had. For example, a company might make the majority of its sales in physical stores. When looking at behavioral data, they might see that many of their customers like to shop online. Based on this information, they could then either open an online store or start advertising their online marketplace more.
6. Enhances reliable assessments
Market segmentation can make marketing efforts more manageable. Measuring segment-specific policies and strategies and practices’ success has also become easier. Growing access to data can let businesses analyze and assess marketing performance and re-segment these more effectively.
7. Optimizes Cost-efficiency & Resource Management
Market segmentation is an important tool for developing business intelligence and maintaining competitive advantage. It gives a deeper insight into the market and helps business firms to identify the segments of customers with greater profits and allows them to carry out more targeted micromarketing.
All the top-notch companies make the best use of their data to implement precisely defined market segmentation in their marketing and service delivery.
8. Improves Business Focus
Market segmentation can also help businesses to focus their efforts, which enables them to establish a brand identity and specialize in a particular type of product. A brand that tries to appeal to everyone in its marketing will come off as generic and unmemorable. It could also leave customers confused about what the brand stands for and what kind of company it represents. Similarly, a company that tries to sell everything likely won’t make a big impact in any one market, and its offerings may be of lower quality compared to companies that specialize. As your company grows, you can expand your offerings, but when first starting out, it can be challenging to differentiate your company if your product offerings are too broad.
9. Streamlines Mass Customization
Mass customization is a process of providing especially tailored products or services to fit the specific needs of a large number of customers in specific segments. The growing amount of clickstream and customer behavior data has helped businesses to apply more accurate customer segmentation, which has made the practice of mass customization more effective.
Mass customization significantly improves the level of customer satisfaction by helping your company to offer value-added and custom-tailored services to a large segment of customers.
RELATED POST: 11 Types of Market Segmentation
10. Maintains Freshness
It would be misleading to presume that customers who fall into a group or subgroup of segmentation stay there forever. In this digital era, customers are bombarded with information, which continuously influences their preferences and priorities, increasing their mobility across the segments.
Data-driven market segmentation heavily relies on the accuracy of customer profiles with new information on a regular basis. It helps your business to deal with your customers with up-to-date information.